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[prospector777]

NICE READ(CMKX)...By: gr8hiker
29 Jan 2005, 09:00 AM EST
Msg. 148431 of 148481
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**LONG BUT VERY IMPORTANT READ **
http://www.ragingbull.lycos.com/mboard/boards.cgi?board=CLB01219&read=148475
Two excellent , insightful viewpoints. Not theory, but fact.

REVISED WITH POWERFUL ADDITON BY SCRIBE***
« Thread started on: Jan 28th, 2005, 6:16pm »

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REVISED: A CPA/Auditor's View Of CMKM's Filing Delay + Confirmation


I'm a former Big 4 auditor. The Big 4 are the four largest audit firms (Price Waterhouse, Deloite and Touche, KPMG and E&Y). I doubt they are doing the CMKX audit but you never know - wouldn't think E&A would be the law firm either.

All audits require obtaining evidence to support that the Company's Financial Statements are prepared in accordance with GAAP (proper accounting principles). The Sarbanes Oxley Act has added even more scrutiny to how auditors are performing their audits. Every firm has their own internal guidelines and auditors have to understand the business/industry, internal controls, mgt team, and perform substantive tests of accounts (obtain audit evidence) etc.

I have said on some other threads that didn't last long or get much scrutiny, that IMO this is a very high risk audit - UC has many deals and JV's and such and the auditors will have to dig into to each and every one of them. Plus it's a first time audit as well and that creates a ton of issues - they have to build up their permanent files (all contracts, legal doc's, etc). If one issue comes up, it can takes weeks to get it resolved. The audit firm has to have a concurring partner review the workpapers - and now under Sarbanes, the Public Company Accounting Oversight Board has authority over the firms - they are all subject to PCAOB coming in looking at how they are performing audits these days. To say the audit firms are now in "overkill" mode would be an understatement. After Enron and with Sarbanes, the industry is in upheaval and the firms are erroring on the side of caution and doing too much work vs. too little (i.e. Enron, Worldcom). They are so busy and understaffed due to Sarbanes that they are dumping clients who are deemed too high risk (they also will look at Corp Goverance, Senior Mgt backgrounds and ethics, etc).

I have no idea where this audit stands, when it started, whose doing it, etc - just saying from my experience this audit would rank in the category of being very high risk and it could very well be the cause of the delay. [Color added by CDLIC]Didn't RG say once the audit was complete, we'd be on our way in a PR months ago

Anyway, i invested here only when RG came on board. In this Sarbanes world, legal and audit firms don't take on high risk clients like CMKX without doing their internal DD. And clients like CMKX don't pay those $500/hour bills unless they expect a return on that investment. CMKX must be paying well over a $1M for RG and the audit. And again, that's the main reason I invested here - that tells me I should get a nice return on my investment at .0002 ave or so.

Just my thoughts.

lvmike32

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Scribe's Reply:

AND, here is a reply to lvmike32's above post. This is by Board Member Scribe as follows:

I have read this post several times, as well as the rebuttal. After re-reading it several times, I am in complete agreement with lvmike.

I am not a CPA, however, I work for a Fortune 100 company in the finance arena. I deal with acquisitions, buy-sells and a variety of other financial transactions. While the transactions that I'm involved in do not involve the SEC, they do always involve the Uniform Commercial Code and the security filings that must be done to ensure a security position for the lender or financial institution in these transactions.

In a lot of instances, I'm involved with one company, usually privately-owned, buying out another company, also usually privately-owned. So, pretty small scale compared to the transactions that CMKX, a publicly-owned company, is involved in.

With that out of the way, let me make a few points...

1) The volume of paperwork, legal review, proof reading and due diligence is huge. If you think we as shareholders conduct a lot of due diligence to feel secure in our relatively small investment, you would be stunned at the staggering amount of due diligence these companies conduct to feel secure about their investment of potentially millions of dollars.

2) I completely concur with lvmike with regards to the voluminous work required to be compliant with Sarbannes-Oxley. While the intent of this legislation was admirable (protect shareholders like us by holding companies accountable for their financial reporting), the resulting regulations are almost stifling. Not only does a company have to prove that their financial reports are accurate, they have to prove that their methods for proving the accuracy of financial reports are reliable and documented. If you have not been involved in this process, which I have, you cannot have a true appreciation for how much time and effort is required to be compliant.

3) For a little while, I think shareholders need to stop thinking like shareholders and start thinking like CEOs and put yourself in Urban's position. You are the CEO of a small, insignificant company that has its stock price being manipulated by outside forces. You know that your company has the potential to become a very strong and significant player by virtue of holding assets which could potentially create a tremendous amount of revenue and wealth for your company. One of the most important things you can do as a CEO is to attract big (institutional) investors with really deep pockets that can provide the working capital that will be necessary to turn the raw assets into major revenue-producing assets. A company can have all the assets in the world, but if they can't get those assets to produce revenue (cash flow), the company is doomed. Now, as the CEO, would you want to announce that you have all these assets before you have the infrastructure (board of directors, governmental filings, proper financial reporting) completely lined up. The answer is no. Institutional investors will take one look and get nervous because of your lack of organization and tell you to come back when you have your ducks in a row.

4) As an investor and shareholder in this company, I would much prefer that we take whatever time is necessary to ensure that every detail of our organization (leadership, financing, corporate documentation, even marketing and sales) is laid out in perfect detail before we file and bare ourselves for all of the public to scrutinize. Once we file, we become fair game for anybody and everybody to check us out inside and out. The last thing I would want is for them to find some detail that was missed because we were in too much of a hurry. This is why Roger Glenn is on board. And this fact alone gives me the utmost confidence. [Note: Color added by CDLIC]

Just my opinion too.

Scribe




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